Union Pacific Reports Fourth Quarter Earnings

Omaha, Neb., January 19, 2006 
Union Pacific Corporation (NYSE: UNP) today reported 2005 fourth quarter net income of $296 million, or $1.10 per diluted share, compared to $79 million, or $0.30 per diluted share in the fourth quarter of 2004. The 2004 results include the impact of a non-cash charge for unasserted asbestos claims of $154 million after-tax, or $0.58 per diluted share. Excluding the asbestos charge, 2005 fourth quarter diluted earnings per share increased by 25 percent.

"Union Pacific is operating more efficiently, allowing us to handle record volumes and recover more rapidly from challenges such as hurricanes, the Kansas washouts and severe winter storms," said Jim Young, President and Chief Executive Officer. "We have gained traction throughout the year with our operating initiatives. I am particularly pleased that we converted strong revenue growth into a significant increase in operating income."

2005 Fourth Quarter Summary

In the fourth quarter of 2005, Union Pacific Corporation reported operating income of $533 million compared to 2004’s $451 million, which excludes the $247 million pre-tax, non-cash asbestos charge.

The Railroad’s commodity revenue was up 13 percent to a quarterly best $3.5 billion, with all commodities posting increases for the quarter. The main component of the growth was an 11 percent increase in average revenue per car (ARC), which reached an all-time record of $1,428 per car in the fourth quarter. Growth in ARC can be attributed to fuel cost recovery under the Company’s surcharge programs and yield improvements.

Business volumes, as measured by total carloads, grew one percent to a fourth quarter record 2.4 million.

The Railroad’s average quarterly fuel price including transportation and taxes was $2.08 compared to $1.46 per gallon in 2004, a 42 percent increase.

Quarterly average train speed, as reported to the Association of American Railroads, was 20.5 mph, the same as the fourth quarter of 2004. Quarterly terminal dwell time improved 4 percent to 29.8 hours versus 31.2 hours reported in the fourth quarter of 2004.

Fourth Quarter Commodity Revenue Summary versus 2004

Industrial Products up 19 percent

Agricultural up 18 percent

Intermodal up 14 percent

Automotive up 8 percent

Chemicals and Energy each up 6 percent

2005 Full Year Summary

Full year 2005 net income was $1.0 billion or $3.85 per diluted share, versus $604 million, or $2.30 per diluted share in 2004. The 2005 full year results include a non-cash income tax expense reduction of $118 million after-tax, or $.44 per diluted share. The 2004 full year results include the impact of the non-cash asbestos charge. The comparison of 2005 and 2004 earnings, excluding the tax and asbestos items, would be $3.41 per diluted share versus $2.89 per diluted share, an 18 percent increase.

Railroad commodity revenue totaled a record $13.0 billion, an 11 percent increase. The main driver of this growth was a $122 increase in ARC to a record $1,358 per car. Growth in ARC can be attributed to fuel cost recovery under the Company’s surcharge programs and yield improvements.

Business volumes, as measured by total carloads, increased 1 percent to a record level of 9.5 million.

Operating income was $1.8 billion, a 16 percent increase from $1.5 billion in 2004, which excluded the non-cash asbestos charge. The reported 2004 operating income was $1.3 billion.

The Railroad’s average yearly fuel price including transportation and taxes was $1.77 compared to $1.22 per gallon in 2004, a 45 percent increase.

Average system speed, as reported to the Association of American Railroads, declined 0.3 mph in 2005 to 21.1 mph. This compares to an average system speed of 21.4 mph in 2004. Average terminal dwell time improved 6 percent versus 2004, to 28.7 hours from 30.5 hours.

2006 Outlook

"Looking ahead, we are optimistic about 2006. Our network is more resilient than it was at this time last year and we are continuing to build momentum," Young said. "We expect demand will continue to be strong, particularly in the areas of coal and intermodal.

"In 2006, we will focus on providing better service to our customers, improving the efficiency of our network and increasing the financial returns on our business."

Non-GAAP Reconciliation

The fourth quarter 2004 operating income, full year 2004 operating income, and diluted earnings per share of $451 million, $1.5 billion and $2.89, respectively, exclude the non-cash charge for unasserted asbestos claims and are non-GAAP measures. The asbestos charge was made to reflect an increase in the Company’s estimated liability, which had previously recognized asserted asbestos claims, to also include unasserted claims.

In addition, the full year 2005 net income of $908 million and earnings per diluted share of $3.41 exclude the income tax reduction item reported in the third quarter of 2005 and are also non-GAAP measures. Management believes these measures provide an alternative presentation of results that more accurately reflects on-going Company operations, without the distorting effects of the asbestos charge and income tax expense reduction items. These measures should be considered in addition to, not as a substitute for, operating income, net income and diluted earnings per share.

The following table provides reconciliations for the fourth quarter 2004, full year 2004 and full year 2005 for operating income, net income, diluted earnings per share and operating margin, excluding the asbestos charge and income tax expense reduction, to reported operating income, net income, diluted earnings per share and operating margin:

Union Pacific Corporation owns one of America’s leading transportation companies. Its principal operating company, Union Pacific Railroad, is the largest railroad in North America, covering 23 states across the western two-thirds of the United States. A strong focus on quality and a strategically advantageous route structure enable the company to serve customers in critical and fast growing markets. It is a leading carrier of low-sulfur coal used in electrical power generation and has broad coverage of the large chemical-producing areas along the Gulf Coast. With competitive long-haul routes between all major West Coast ports and eastern gateways, and as the only railroad to serve all six major gateways to Mexico, Union Pacific has the premier rail franchise in North America.

Contact for investors is Jennifer Hamann at (402) 544-4227.
Contact for media is Kathryn Blackwell at (402) 544-3753 or (402) 319-4288.

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